To Stop Consumer Fraud

Federal law enforcement agencies should fight consumer fraud, but as you note, payment companies, not fraudsters, are the “choke point” in the operation.

Rather than directly pursue fraudulent merchants in disfavored industries like payday loans, federal agencies are targeting payment companies. The goal is to cause such expense and reputation risk to payment providers as to effectively coerce them to shut off whole merchant categories.

Consumers have zero liability for fraudulent credit and debit card charges because payment companies take on fraud losses, and thus the industry already has a powerful incentive to shut down fraudulent merchants.

Our country’s payment systems serve more than eight million merchants, and fraudsters who lie to consumers will also lie to payment companies to gain access to the paymentinfrastructure — the networks and processors responsible for the transactions.

Law enforcement doesn’t target car dealers for drunken driving or mobile phone operators for crimes plotted over a cellphone call. To stop fraud, the feds should target the fraudsters.